The Chocoholics guide to self-employment: The legal bits

In the second of our series of guidelines for self-employment, we look at all the legal requirements you need to fulfil to get you on the road to being your own boss!

One of the most intimidating things about becoming self-employed can be all the legal jargon, tax and NI requirements. But it's really quite simple to set yourself up, particularly if you know a fantastic accountant who can talk you through the whole process. It's also worth adding the HM Revenue & Customs website to your bookmarks as they have some fantastic straightforward advice.

Here are the basic things you'll need to do:

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  Register as self-employed with the HM Revenue & Customs. You can do this online, over the telephone, or print off an application to post to them. Prepare for your annual tax returns. Instead of having your tax and NI deducted from your monthly salary, you'll have to pay it all in one go at the end of each tax year (April). These need to be sent back by 31 October for paper ones or 31 January for online ones. You'll be sent the following forms:
• • If you're self-employed you'll need to complete either page SA103S (if your turnover was below £68,000) or SA103F (if your turnover was £68,000 or more).
  • If you're self-employed in a business partnership you'll need to complete either page SA104S (for partnerships that only have trading income - and taxed bank and building society interest or alternative finance receipts); or page SA104F (for all other types of partnership income). These forms detail your share of the partnership's profit or loss.
  • You may need page SA102 if you also work as an employee.
• Keep track of all your expenses, and store all receipts. The expenses you have for business can be taken off your tax return later. Also print out your bank statements every month. If you tend to use your bank card a lot for non-business expenses (e.g trips to fast food joints or high street shops) it might be worth looking into opening an alternative account for your business transactions.
• Your accountant or HM Revenues should be able to talk you through setting up your NI payments, either by monthly Direct Debit or a quarterly bill.
• It's best to put away around 25-30% of your income to cover your tax return and NI.
  

So that's the scary tax and NI stuff dealt with! I'd recommend putting a couple of hours aside every month to update your records, rather than panicking at the end of the year. It's really not as scary as it looks though, and the people at HMRC are really helpful if you give them a ring.

Next post: The Chocoholics guide to self-employment: How much time will you need?